By Eliana Raszewski and Nicolás Misculin
BUENOS AIRES (Reuters) – Argentina’s governing Peronist coalition is on the brink of a political crisis, with President Alberto Fernández facing a struggle for control after voters abandoned his center-left party in mid-term elections, undermining their power in Congress.
The party, a mix of moderate allies of the president and a powerful far-left division around Vice President Cristina Kirchner, now has a dilemma: give ground to work with the opposition, turn to the left — or split in half .
“The government has serious problems. He is a president who is totally powerless”, said Mariel Fornoni, from Management & Fit political consultancy. “The coalition is broken.”
Sunday’s vote saw the Peronists lose a majority in the Senate for the first time since 1983, with several provinces pulling drastically away from Fernández’s government, which took power in 2019 on a center-left platform.
The loss undermines his administration’s ability to pass legislation through Congress, hurting plans for judicial reform and adding complexity to negotiations over a new $45 billion deal with the International Monetary Fund, which needs legislative approval.
Alberto Ramos of Goldman Sachs said in a statement that the defeat could leave the ruling party weakened and that “internal dissent over the direction of policy could grow even further”, potentially hurting moderate voices such as Economy Minister Martín Guzmán .
“This scenario increases the risk of an (even) more heterodox/interventionist policy mix that could further complicate the already difficult negotiation of an IMF program,” he said.
“The loss of control of Congress implies that the administration will have to negotiate with a stronger and reenergized opposition, which can lead to a noisy and volatile policy-making process.”
In a message recorded after the defeat, President Fernández adopted a moderate tone, saying he would ask for dialogue with the opposition, redouble efforts to resolve the IMF debt, present an economic plan to Congress and target inflation.
However, he played down suggestions to curb public spending, which many see as vital amid difficult economic conditions.
“It is necessary to put the State’s accounts in order, but never at the expense of adjusting spending. The adjustment has been tried several times in Argentina and has only deepened inequality and poverty,” he said.
POLITICAL COST
The midterm defeat will likely come at a price for the government.
“They will start to depend on negotiations with possible allies and, when you enter into these types of conversations, they start to be expensive,” said analyst Carlos Fara.
The government has a long list of crises to resolve.
Inflation is above 50% a year, poverty is above 40% and the peso trades at around 200 to the dollar in informal markets that have flourished amid capital controls, double the official exchange rate of 100 pesos. per dollar.
Some predict a faster currency devaluation to bring the two rates closer and equalize rising prices.
“In December or a little earlier, the pace of official devaluation will accelerate to prevent the dollar from falling far behind inflation,” said Roberto Geretto, economist at Fundcorp.
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